Comcast Gets Smaller

The nation's largest cable-system operator just got a wee bit smaller.

Comcast (CMCSA Quote), which completed its acquisition of AT&T Broadband last November, said Tuesday it had reached a definitive agreement to sell systems in four Western states to privately held Bresnan Broadband Holdings.

As part of the transaction, Comcast will receive $525 million in cash, enabling the cable operator to do what all major cable operators are interested in doing these days: cutting debt to ease investors' concerns and improve their own deal-making flexibility.

Comcast's shares fell $1.15 Tuesday to trade at $24.90.

The proposed transaction, which AT&T (T Quote) first announced in early 2002, may indeed improve Comcast's balance sheet and sharpen its focus on systems in larger markets.

The deal won't, however, reduce Comcast's official subscriber count, nor -- despite the half-billion-dollar check -- will it shed much light on how cable operators are valuing cable systems these days.

The cash portion of the deal comes to about 2% of the $28.5 billion in long-term debt that Comcast carried on a pro forma basis as of Sept. 30. The cable systems that Comcast is handing over to Bresnan have a distinctly "nonurban" flavor, as Comcast hints; they amount to 317,000 subscribers in Montana, Wyoming, Colorado and Utah. Meanwhile, Comcast says it reaches 70% of cable subscribers in the nation's 20-largest markets.

Comcast's latest official count of 21.4 million subscribers will remain unchanged, says a spokesman, since the company hasn't included the affected systems in its recent official counts.

And unfortunately for investors seeking cable-TV pricing data, the companies didn't reveal the full terms of the deal. In addition to the cash payment, Comcast will receive an undisclosed amount of equity in the buyer.

The transaction is expected to close by the end of March.